CRS Recovery Inc et al v. Laxton et al

Filing
323

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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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CRS RECOVERY, INC., a Virginia
corporation; and DALE MAYBERRY,
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v.
JOHN LAXTON, aka
johnlaxton@gmail.com; and
NORTHBAY REAL ESTATE, INC.,
Defendants.
United States District Court
For the Northern District of California
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ORDER DENYING
DEFENDANT NORTHBAY
REAL ESTATE,
INC.’S MOTION TO
DISMISS
(Docket No. 260)
Plaintiffs,
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No. C 06-7093 CW
________________________________/
Defendant Northbay Real Estate, Inc. moves to dismiss the
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complaint brought against it by Plaintiffs CRS Recovery Services,
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Inc. and Dale Mayberry.
Plaintiffs oppose Defendant’s motion.
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For the reasons set forth below, the Court DENIES Defendant’s
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motion.
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BACKGROUND
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On July 23, 1995, Mayberry registered the domain name
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“rl.com.”
At that time, he also owned the domain name “mat.net.”
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Mayberry used the email address “dale@mat.net” as the
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administrative contact when he registered rl.com.
Mayberry last
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renewed the registration for rl.com on July 23, 2002, when he paid
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in advance for three years so that the registration would expire
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on July 24, 2005.
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On December 19, 2003, a new registration of mat.net was made
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by Li Qiang, and Qiang subsequently used his control over the
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dale@mat.net email address to transfer ownership of rl.com to
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himself.
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In May 2005, Laxton purchased rl.com from Bernali Kalita, who
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in the meantime had acquired it from Qiang.
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rl.com to Northbay.
Laxton later assigned
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On July 21, 2005, Mayberry signed two relevant documents.
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The first was titled “Agreement for Domain Name Transfer,” and the
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second was attached to the agreement as Exhibit A and titled
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“Assignment.”
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3-5.
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Services, LLC” all rights, title and interest in and to the domain
Donaldson Decl. ¶ 2, Ex. A; Lau Decl. ¶ 4, Ex. A,
In the latter document, Mayberry assigned “CRS Recovery
United States District Court
For the Northern District of California
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name rl.com.
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to “CRS Recovery Services, LLC” as the recipient of the rights to
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rl.com, the company is referred to as “CRS Recovery Services,
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Inc.” above the signature line.
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were executed by Mayberry, but were not signed by anyone on behalf
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of CRS Recovery Services. Id.
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Id.
While the body of the agreement also referred
Id.
The agreement and assignment
At the time that these documents were executed, neither CRS
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Recovery Services, Inc. nor CRS Recovery Services, LLC had been
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formed.
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CRS Recovery Services, Inc., reached the agreement with Mayberry
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because he intended to establish CRS Recovery Services in some
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form shortly thereafter and wanted to obtain the rights to RL.com
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on behalf of it.
Lau Decl. ¶ 4.
Richard Lau, who is now the President of
Id.
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Almost five months later, on December 13, 2005, Lau and
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Steven Lieberman incorporated CRS Recovery Services, Inc. in
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Virginia.
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entity called CRS Recovery Services, LLC was ever formed.
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Decl. ¶ 5.
Donaldson Decl. ¶ 7, Ex. F; Lau Decl. ¶ 5, Ex. B.
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2
No
Lau
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On February 27, 2006, Lieberman sent Laxton a demand letter
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on behalf of Mayberry, stating that, among other things, “it is
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unequivocal that Mr. Mayberry is the rightful owner of the domain
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name RL.com.”
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Donaldson Reply Decl. ¶ 2, Ex. A.
CRS Recovery Services, Inc. and Mayberry filed this action on
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November 15, 2006, against, among others, Laxton, Northbay and
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Qiang.
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second amended complaint (2AC).
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Plaintiffs allege, “In July, 2005, Mayberry transferred all of his
Docket No. 1.
On October 30, 2007, Plaintiffs filed their
Docket No. 51.
In the 2AC,
United States District Court
For the Northern District of California
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right, title and interest in RL.Com to CRS for valuable
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consideration.”
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Mayberry’s shoes pursuant to a written assignment to recover
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possession of RL.Com and MAT.Com, and to recover pecuniary damages
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suffered by Mayberry.”
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2AC ¶ 16.
They also allege that “CRS stands in
2AC ¶¶ 24, 31.
In early 2008, CRS Recovery Services, Inc. recovered mat.net
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from Liang and returned it to Mayberry.
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E; Lau Decl. ¶ 8.
Donaldson Decl. ¶ 6, Ex.
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In February 2008, after mat.net had been returned to
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Mayberry, he and Lau, personally and on behalf of CRS Recovery
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Services, Inc., signed a document entitled “Confirmation of
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Contract Performance and Unqualified Assignment of Rights.”
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Donaldson Decl. ¶ 5, Ex. D; Lau Decl. ¶ 9, Ex. A, 1-2.
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document, they described the 2005 agreement as a contract between
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Mayberry and Lau and stated that Lau had subsequently conveyed all
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rights to recover rl.com to CRS Recovery Services, Inc.
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Decl. ¶ 5, Ex. D; Lau Decl. ¶ 9, Ex. A, 1.
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agreement, Mayberry again agreed that he conveys to CRS Recovery
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In this
Donaldson
In the February 2008
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Services, Inc. irrevocably and without qualification, all rights
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to the ownership of rl.com.
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Id.
On June 13, 2008, Plaintiffs filed a motion for leave to file
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a third amended complaint.
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stated, “Plaintiff Mayberry should be dismissed from the action,
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as he has recovered MAT.Net, and seeks no further relief.”
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3.
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100.
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United States District Court
For the Northern District of California
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In the motion, they
Plaintiffs later withdrew this motion for leave.
Id. at
Docket No.
CRS Recovery Services, Inc.’s corporate status has since been
terminated.
Donaldson Decl. ¶ 3, Ex. B.
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Docket No. 76.
LEGAL STANDARD
Subject matter jurisdiction is a threshold issue which goes
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to the power of the court to hear the case.
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matter jurisdiction must exist at the time the action is
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commenced.
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Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988).
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court is presumed to lack subject matter jurisdiction until the
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contrary affirmatively appears.
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Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989).
Federal subject
Morongo Band of Mission Indians v. Cal. State Bd. of
A federal
Stock W., Inc. v. Confederated
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Dismissal is appropriate under Rule 12(b)(1) when the
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district court lacks subject matter jurisdiction over the claim.
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Fed. R. Civ. P. 12(b)(1).
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attack the sufficiency of the pleadings to establish federal
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jurisdiction, or allege an actual lack of jurisdiction which
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exists despite the formal sufficiency of the complaint.
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Publ’g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th
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Cir. 1979); Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.
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1987).
A Rule 12(b)(1) motion may either
Thornhill
Because challenges to standing implicate a federal court’s
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subject matter jurisdiction under Article III of the United States
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Constitution, they are properly raised in a motion to dismiss
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under Rule
4
2000).
12(b)(1).
White v. Lee, 227 F.3d 1214, 1242 (9th Cir.
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DISCUSSION
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In its motion, Northbay argues that neither Mayberry nor CRS
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Recovery Services, Inc. had standing at the onset of this case to
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pursue the claims as to RL.com.
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lacked standing because, in 2005, Mayberry assigned his interest
Northbay states that Mayberry
United States District Court
For the Northern District of California
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in RL.com to CRS Recovery Services, LLC.
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that CRS Recovery Services, Inc. lacked standing, because
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Mayberry’s 2005 assignment was in favor of the LLC and not the
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corporation, and because the assignment took place before the
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corporation was formed.
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standing to bring the claims related to RL.com.
Northbay also argues
Thus, Northbay contends no one has
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In its reply, Northbay argues instead that the 2005
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assignment was invalid and that, while Mayberry may have had
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standing to bring the claims related to RL.com at the inception of
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the lawsuit, he only asserted claims related to mat.net.
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The Court finds that Plaintiffs have standing to pursue these
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claims.
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through the 2005 agreement and assignment.
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CRS Recovery Services, Inc. obtained the rights to RL.com
“Under Virginia law, pre-incorporation actions of de jure
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corporations are valid and binding on the parties involved.”
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Hubbard v. Stony Point Land, Inc., 457 B.R. 479, 482 (E.D. Va.
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2011) (finding a contract signed twenty months before
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incorporation to be binding, and collecting cases).
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Virginia does not recognize de facto corporate existence, it does
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“While
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allow a de jure corporation to assume the rights and obligations
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of a contract entered into by promoters prior to the legal
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existence of the corporation.”
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Int’l, Inc. v. Enter. for Empowerment Found. at Norfolk State
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Univ., 68 Va. Cir. 185, at *4 (2005).
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v. Donald P. & Patricia A. Brennan LLC, 385 F.3d 836, 842 (4th
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Cir. 2004) (“Virginia law allows an agent or promoter of a
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business entity to bind the entity to contracts even before the
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entity is formed.”); Bolling v. General Motors Acceptance Corp.,
Geographic Network Affiliates-
See also T.G. Slater & Son
United States District Court
For the Northern District of California
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204 Va. 4, 10 (1963) (although “on the date the contract was
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signed the corporation had not yet come into legal existence,” the
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parties were bound because the corporation later did come into
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existence and continued to abide by the contract).
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Here, Lau, acting as a promoter for CRS Recovery, Inc.,
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obtained an assignment of rights to RL.com.
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contains an immaterial error regarding the form of the company,
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the documents transfer the rights for RL.com to CRS Recovery
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Services in some corporate form and impose obligations on that
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entity.
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abided by its obligations in attempting to recover both domain
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names, including by filing the instant action.
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2005 assignment transferred rights in RL.com to CRS Recovery
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Services, Inc. prior to the inception of this suit.
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While the agreement
The corporation did later come into existence and it
Accordingly, the
Further, even if the 2005 transfer were ineffective, Mayberry
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had standing when the action was filed, and he subsequently
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transferred rights to CRS Recovery Services, Inc. in the 2008
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confirmation and agreement.
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action may be continued by or against the original party unless
“If an interest is transferred, the
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the court, on motion, orders the transferee to be substituted in
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the action or joined with the original party.”
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Civil Procedure 25(c).
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already joined as a party, the Court need not consider whether it
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should be substituted or joined here.
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Federal Rule of
Because CRS Recovery Services, Inc. is
In addition, while Northbay argues that the operative
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complaint makes clear that Mayberry brings claims only as to
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mat.net, the complaint is susceptible to a broader construction.
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In the prayer for relief, Plaintiffs specify that the mat.net
United States District Court
For the Northern District of California
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domain name should be transferred to Mayberry, but they pray that
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the RL.com domain name be transferred to “plaintiff,” a more
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encompassing descriptor.
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allege that Mayberry was injured by the loss of both domain names
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and that CRS Recovery Services, Inc. “stands in Mayberry’s shoes
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pursuant to a written agreement to recover possession” of both
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domain names.
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would remove Mayberry as a named plaintiff, they did so with the
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understanding that CRS Recovery Services, Inc. would be able to
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pursue the claims that it gained through assignment from Mayberry.
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In the body of the complaint, Plaintiffs
Further, while Plaintiffs have stated that they
To the extent that Northbay argues that CRS Recovery
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Services, Inc. cannot prosecute this action because its corporate
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status has been terminated, this is unavailing.
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law provides, “The termination of corporate existence shall not
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take away or impair any remedy available to or against the
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corporation . . . for any right or claim existing or any liability
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incurred, prior to such termination,” and that such actions “may
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be prosecuted or defended by the corporation in its corporate
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name.”
Virginia Code Ann. § 13.1-755.
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Virginia state
There is no evidence in
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the record to suggest that CRS Recovery Services, Inc.’s claim
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arose after the termination of its corporate status.
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CONCLUSION
For the reasons set forth above, the Court DENIES Defendant
Northbay’s motion to dismiss (Docket No. 260).
IT IS SO ORDERED.
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Dated: May 4, 2012
CLAUDIA WILKEN
United States District Judge
United States District Court
For the Northern District of California
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